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This is a question about taxation of income/gift received…

Hi,This is a question about...
Hi,This is a question about taxation of income/gift received from a foreign family trust. We're in the process of creating a family trust in New Zealand. My mom is not a US citizen (Turkish citizen, lives in Turkey). I'm a US citizen and live in New York.My mom will be the settlor of the family trust in New Zealand, and the trust will have some assets in it. One asset she owns via the trust is a foreign corporation that generates income via dividends.She'd like to gift me the income of this foreign corporation's dividends. I know that in the US, gifts from foreign persons are not taxed, but I need to inform the IRS of the amount if it exceeds $100,000 per year, right?The tricky part here which I'm not sure is : does it matter whether the gift is coming from the Trust's bank account in New Zealand? or does it have to be my mom's personal bank account where I receive the wire from in order for the money to be treated as a gift?Also, does it matter if I'm the beneficiary of the trust or not for taxation purposes?
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Answered in 9 minutes by:
7/19/2017
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,838
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Yes, you are correct about the reporting of gifts. Yes, it does matter where the money comes from. If not from your mother directly then you would be taxed on the dividends.

If the trust pays you the dividend income it is income to you for US tax purposes. If your mother receives the income then makes a gift to you, that is not taxable (reportable depending on the amount ).

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Please let me know if you need more information.
If not then scroll up to see the STARS to rate so I am credited.

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Customer reply replied 10 months ago
Even if I'm not the beneficiary of the trust, she owns the corporation, which produces income for her. The income proceeds are sitting in trust's bank account. And if this is wired to me directly from the trust's bank account, I pay income tax. If this is wired to her personal bank account first, and then wired to me, then it's a gift and I pay no taxes. Correct?

Correct.

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Did that clarify?

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I tried to keep it as simple as possible but I would appreciate knowing if you understand. Thanks

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Customer reply replied 10 months ago
thank you. Is there any way the income from a foreign corporation or entity or partnership owned by mom, can send me gifts without coming from her personal bank account?
Customer reply replied 10 months ago
Or does it have to absolutely be her personal bank account (no other way) for me to receive tax free gifts from my mom's assets?

No, they would be seen as payments to you and not gifts.

Payments from entities (business or trusts that hold business assets) other than individuals would be seen as income.

You are most welcome.
A positive 5 star rating is appreciated so I am credited for assisting.

Robin D.
Robin D., Senior Tax Advisor 4
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